If you work from home, here’s how to claim a tax refund

Tax deductions for home office expenses will only be considered in certain circumstances:

Landlords and employees that work from home offices have less than three months to file their tax returns and claim certain expenses back from the South African Revenue Service (SARS).

While ordinary homeownership does not offer any tax benefits, owning an investment property or having a home office will affect one’s tax return.

As a landlord, you are required to declare the total amount of rental income received as part of your taxable income, but Adrian Goslett, regional director and chief executive of RE/MAX of Southern Africa, says you can lower that taxable income by making certain deductions of non-capital expenses.

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He says non-capital expenses are those that you are obliged to incur when letting out a property. Examples include items such as:

  • Rates, taxes, and property levies
  • Security costs and garden services
  • Interest paid on the home loan
  • Advertising costs of marketing the property and/or the rental agent’s fees for securing a tenant
  • Insurance (only homeowner’s insurance, not household contents insurance)
  • Repairs in respect of the area let (not applicable if the tenant has moved out and repairs are made to the home to sell it)

By deducting these expenses, landlords can lower how much tax is owed by lowering their taxable income.

“These expenses won’t automatically reflect on your return, so it is important to take the time to submit these when filing your return. Be sure to keep all receipts on file in case SARS ever asks for proof of the expenses.”

Tax deductions for home office expenses

Another thing that Goslett says won’t automatically be included on your individual tax return is the deduction for home office expenses, if they apply. A tax deduction can be made based on the interest charged on the outstanding bond amount if you are employed, and a condition of the employment is to carry the cost of keeping a home office as the central business location.

Section 23(b) of the Income Tax Act states that a tax deduction for home office expenses will only be considered in the following circumstances:

If the room is regularly and exclusively used for the purposes of your trade (employment), and is specifically equipped for that purpose. The home office must therefore be set up solely for the purposes of your trade; or
If your remuneration consists only of a salary and similar remuneration, your duties must be mainly performed in this part of the home. It therefore means you must perform more than 50% of your duties in your home office; or
If more than 50% of your remuneration consists of commission or variable payments based on your work performance, more than 50% of those duties must be performed otherwise than in an office provided by your employer.

Typically, SARS explains, the types of home office expenditures referred to in section 23(b) are those that are closely linked to the premises, namely:

rent of the premises
cost of repairs to the premises, and
expenses in connection with the premises, which could include rates and taxes, cleaning costs, and electricity.

Other typical expenditures that may qualify for a separate deduction in respect of maintaining a home office, includes:

  • general wear-and-tear on items used for trade purposes in the office
  • office equipment, furniture and fittings, and repairs thereto
  • phones
  • internet
  • stationery

The two lists above do not reflect expenditure that is necessarily deductible but merely the types of expenditure that may typically be incurred in relation to maintaining a home office.

It can be complicated to perform the necessary calculations for this deduction, especially if the homeowner withdraws an amount from the bond or makes a substantial additional payment towards the bond. Goslett therefore recommends that homeowners consult with a professional tax consultant to help them work out this amount correctly.

“It is important to work out any tax deductibles correctly, as there could be serious penalties if the return is submitted incorrectly. If there is ever any area of doubt, it is best to consult with a professional financial adviser or tax consultant who can provide assistance and guidance through the process.”

Read here for more information on claiming tax refunds for a home office.

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